Windfall Profits For ROC Generators Running At £1 Billion A Month
By Paul Homewood
I have written before of how renewable generators are profiteering from the Renewable Obligation scheme. I now have the generation data from November 2021 to quantify just how much.
To recap, as we know power prices began to rocket last autumn. Day ahead prices hit the £200/MWh mark in November, up from the historic level of under £50.
https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators
Under the Renewable Obligation scheme, renewable generators are subsidised by ROC’s. Last year , the total subsidy was worth over £6 billion, all of which is added to our energy bills.
On top of this subsidy, of course, generators also receive an income from electricity sales.
Virtually all of our onshore wind generation, about 95%, is subsidised via Renewable Obligation Certificates, ROCs. Something like two thirds of offshore wind and half of solar output is also covered.
BEIS have now published the generation data for all ROC schemes for last November, as per the table below.
We also have the market price data for the month, as provided by the Low Carbon Contracts Company, which they use for calculating subsidy payments under the CfD scheme. Obviously these are average prices, rather than the actuals received by each individual generator. However, they calculate what they call the Intermittent Market Reference Price for each category of intermittent generators, so they are clearly robust and an accurate reflection of revenue.
Biomass prices are lower, as much of baseload generation would have been sold on Forward Contracts at lower prices. These can be expected to rise after a time lag.
|
November 2021 |
GWh |
ROC £/MWh |
Electricity Sales £/MWh |
Total Income £/MWh |
| Onshore | 2711 | 55.00 | 173.72 | 228.72 |
| Offshore | 2140 | 104.5 | 173.72 | 278.22 |
| Solar | 216 | 78.65 | 176.61 | 255.26 |
| Biomass | 1592 | 64.35 | 102.45 | 166.80 |
https://www.gov.uk/government/statistics/energy-trends-section-6-renewables
Putting the numbers together, we see, for instance, that we are paying £278.22/MWh for offshore generation.
When the ROC scheme was set up in 2002, it was never considered that market prices could rise so high. The implicit understanding was that renewable generators could make a healthy profit with market prices at around £50/MWh.
Now they are not only benefitting from sky high electricity prices, they are also still receiving their handsome subsidies.
Clearly the ROC scheme was poorly designed from the outset, but Blair was so keen to push ahead with renewable energy that he was blind to its obvious flaws. Now we are paying the price.
For November 2021 alone, the windfall profit for wind, solar and biomass was £711 million. This is the profit over and above a market price of £50/MWh.
Profits will be even greater now, with market prices over £220/MWh. Indeed, windfall profits are probably already running over £1 billion a month.
There is clearly now an unanswerable case for a drastic revision of the ROC scheme. There will doubtless be legal challenges. However, if these prove to be insuperable, the government should instead institute a windfall tax. There are of course precedents for this.
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NOT A LOT OF PEOPLE KNOW THAT 
Who owns our white elephants? I believe that most of the windfall goes to Germany and Denmark, is that correct?
Regarding windfall profits, we also have the banks and big-pharma who profited massively from QE and the pandemic.
Astra Zeneca sold vaccines at cost price. “Big pharma” did not make untoward profits, unless you think they shouldn’t have bothered producing vaccines.
Big pharma did make enormous profits from the circumstances and is just as a legitimate target for a windfall tax as oil etc. Yes AZ were an exception initially, but they are now taking profit.
Big Pharma is not Big Charity Pharma. As there are more than two vaccines then market forces should play a big part in costs but doesn’t. This has to be down to the purchasing negotiation.
PPE profits seem to be down to the same poor purchasing negotiation coupled with what can only be described as corruption.
NHS has along history of wasting money, along with the Mod and all arrms of government.
Blaming the seller for government incompetence and corruption let’s them off the hook.
The vaccines were bought at cost for the UK. Given the huge risks – billions of cost with no guarantee of success – profits are fine by me. And why rail against companies doing what they are set up to do? If there’s a fault, it’s with useless government.
But weren’t these so called vaccines just an anti body producing procedure that ‘in theory’ only gave the recipient a helping hand against ‘all variants’ in the off chance they became infected while they were still around at high levels in the body, at which point it was the infection that stimulated natural immunity. ?
Off topic sorry
Big Pharma is another huge cesspit of corruption that has profited massively from the experimental vaccines and from expensive and largely ineffective – just like the vaccines – treatments. The US authority, the FDA is bought and paid for by them, as is much of government given the huge sums they spend on lobbying. And behind Big Pharma are shady pseudo-charities funded by the likes of Gates who have done huge harm to the population by preventing cheap and effective treatment, perpetrating the biggest medical failure in history.
OFGEM were originally supposed to stop customers being cheated by price fixing between suppliers (oligopoly). Now it seems they are the main culprits in increasing customers costs by going down the renewable green path. Since Jonathan Brearley (who co wrote the climate change act) took over as CEO they have lost the plot.
Exactly right. Ofgem was set up to ensure there was a “market” that ensured prices were the lowest possible for consumers whilst ensuring security and reliability of generation. Now Ofgem protects its favoured generators at the expense of customers to pursue fantasy CO2 reductions.
Why not reduce the roc price to £0.00?
Contracts.
How can this be? Mr Karteng has assured us renewables are as cheap as chips. 😁
…that’s because he believes everything that Deben tells him!
Radio 4 this morning had an interview with the Chairman of Octopus, who stated that Wind farms are much cheaper than gas. The R$ presenter sounded just like a cheer leader.
Off topic but one to disconcert the Ch of Octopus.
The daily bulletin from gCaptain which deals mostly with shipping matters, reports that Exxon Mobile have decided to proceed with a $10billion scheme and go ahead with the 4th Guyana off-shore (oil) project. This is expected to produce 250,000 barrels per day from 2025 lifting from 10 billion oil-equivalent barrels of proven recoverable resource.
The Chairman of the Octopus that charges these prices during the month heat pumps draw most energy most of the time from our grid?
In or around 2008/9 I was told that the clear annual profit per large onshore turbine was around £500,000 and landowners/farmers were being paid £25000 a year for each machine on their land. Does anyone know what today’s figures are?
This problem would not arise with state ownership of electricity generators, which would also solve the problem of the cost of risk for new ones, especially nuclear ones. This is why China can get nuclear power stations but the UK can’t.
No private capital is going to be risked in building a power station when its future operation/income could be halted or reduced on the whim of a “progressive” govt, just as no company is going to build tanks that would only generate income when they are used.
So the state would simply supply electricity at a price to be determined how? And how does it keep costs low? How does it maintain efficiency? You know, all the things that plague state iowned things like the NHS?
Until renewables came along, we didn’t have these problems. It has nothing to do with state ownership.
From DT article July 2013,
‘Nor is anger confined to the political left.Conservative MEP Struan Stevenson rages
about energy policies that, he says, will soon have netted Scottish landowners a grand total of £1 billion from wind farm developers. ‘Rental payments vary and are top secret,’ Stevenson writes, ‘but, based on estimates, the Duke of Roxburghe could net around £1.5 million a year from 48 120-metre high turbines at Fallago Rig
in the beautiful Lammermuir Hills.
Gordon-Cumming could be earning around £435,000 annually from 29 giant turbines on
his Altyre Estate near Forres.
Gotta like this bit …
The Earl of Moray is estimated to receive £2 million a year from 49 turbines at Braes of Doune near Stirling.’
No, there are still 36 x 2MW. there times
But, who actually owns it?
History
The farm was built by Alfred McAlpine in 2007 and handed over to Airtricity to operate. An agreement was reached with Centrica, the owners of Scottish Gas, to purchase energy output from the farm. The Special Purpose Company became owned jointly by Greencoat UK Wind and by a fund managed by Hermes GPE LLP after Greencoat UK Wind acquired its 50 per cent interest from SSE.[1] wiki
Just about mentioned ferries prices
Too often serene to be nay use
https://www.telegraph.co.uk/business/2022/04/05/elegant-serene-wind-farms-will-lower-energy-bills
For what is worth I’ve emailed Paul’s article to my MP suggesting a windfall tax and asking for comments. This should be interesting should she ever reply.
North Devon already has its landscape industrialised by wind turbines. I will be telling my local MP that unless further building of these money spinners is stopped, my vote is lost.
Amongst the many interesting facts from BEIS Energy Trends UK 2021 (vs 2020) [NB – UK, not just GB] are:
1. Total electricity *generated* in 2021 was 310 TWh. Final *consumption* of electricity was 285 TWh in 2021
2. UK gas demand rose by 5.4 per cent in comparison with 2020, reaching 854 TWh.
3. Renewables generation decreased in 2021, down by 9.5% to 121.9 TWh.
4. Wind generation suffered a 14% decrease (11 TWh) in 2021, despite an approx 4% increase in capacity. Wind speeds were below average in every month except Feb.
5. Generation from fossil fuels increased in 2021 to 132.2 TWh, a 12% increase (i.e. 43% of total generation)
6. Generation from gas was 124.2 TWh, an 11% increase. (i.e. 40% of total generation)
7. Generation from coal increased by 18% to 6.5 TWh.
8. Generation from nuclear was the lowest value on the published data series at 46 TWh as plant outages continued to restrict generation.
9. “Hydro also suffered from less favourable rainfall in 2021 with generation falling by 26 per cent when compared to 2020, the highest fall in percentage terms by technology. With capacity stable and no notable outages, the key driver was the lower average rainfall in 2021.”
JP: Great report! I think I might just send that to my MP and ask him to square the circle that is – how do we get enough energy (bet he doesn’t know the difference between it and power) to support our country.
Furthermore, JP, I see that the excess energy generated (25 TWh) far exceeded the 11 TWh) for wind. Hmmmm…(or have I misread the report?)
Hi Harry
“I see that the excess energy generated (25 TWh) far exceeded the 11 TWh) for wind. Hmmmm…(or have I misread the report?)”
BEIS seems to deliberately obfuscate relative performances. Much of its data is enveloped in sentences rather than shown in easy-to-compare tables.
That “11TWh” is the 14% decrease in wind generation 2021 vs 2020.
BEIS chooses to not admit how little/much wind generated in 2021.
That’s interesting stuff. If we knew the total amount paid by all customers we could calculate the total system cost per MWh. If we could do thst for previous years, we could show total system costs over time and the effect of these “cheap” renewables.
Actually, the most egregious example of ROC accreditation is the decision by energy minister Brian Wilson, to accredit hydro stations in Scotland of <20MW capacity, which had been built decades before, for ROCs subsidy. Indeed the 'bold' Owners even 'declared' six stations that were bigger than 20MWs as below 20MWs capacity thus qualifying even those ones for ROCs.subsidy.
Apparently, someone from SSE went to see someone in London in 2001 and told them that as the price of electricity was low at that time and as they needed to spend £300million refurbishing all their Scottish hydro plants, they were thinking of closing some of them down.
The dummies believed this even tho' Scottish hydro assets were undoubtedly producing the cheapest electricity in Britain. and there was absolutely no way that they would close any.
About half of all Scottish hydro output was accredited for ROC subsidy.
I have been following this story for years – I put in a Petition to the Scottish Parliament in 2009 but it got nowhere.
With great difficulty, I have managed to find out the number of ROCs issued to these stations. and as of last year, it was over 31million. At an average value of £50/ROC over the years that would have amounted to over £1.5billion. You could have bought all those stations for a lot less than that, and it puts SSE's £300million refurbishment figure ( for all its stations ) into context.
This subsidy regime will continue for some years to come so the subsidy will continue to accrue.
However with the ridiculously high price that SSE etc are now getting for their hydro output, to keep giving them their totally unjustified subsidy is simple stupidity.
Type in 'Subsidy and Subterfuge' to see how it all began.
built built
Nick, I remember the official written report on the deep mine Longannet complex failure.
Sunday stuff, of course.. Who got the big dosh from it? SCB?
Paul!!!!!
Labour want a windfall tax on oil and gas companies but they have the wrong target and should go after the winners in the ROC game.
Yes, saw Labour going after BG’s £118m profit – that’s less than £10/household supplied.
These comments are accurate, to the extent that they assume the generators are selling their power and ROCs at current spot prices. However, most generators pre-sell their assumed production for 10-15 years before commencing construction of their projects, in order to lock in their revenue risk and be certain of being able to repay their financing. They would then only enjoy the high spot prices for any additional generation that they are able to produce beyond their hedged quantity.
They do? To whom? I’ve seen no evidence of 15 year contracts at a fixed price for renewables?
If they have a CfD, that is their forward PPA and means that they don’t get access to the benefit of higher spot prices. Under the CfD, they are obliged to pay back the excess spot price. Outside the CfDs, there are many renewable PPAs being entered. See this survey for example: https://www.energymonitor.ai/finance/corporate-strategy/uk-renewable-ppas-continue-to-grow-in-2021
I’m a bit suspicious about that report.
Renewable power purchase agreements (PPAs) in the UK have increased by 1.2 gigawatts (GW) since September 2020, reaching a total of 30.7GW, says a report from energy consultancy Cornwall Insights.
That seems very unlikely to me: it would cover more than the total of wind generation installed, and far exceed any likely corporate demand. Generation that has already accessed CFDs is locked in to that regime, and has no need of other revenue protection. Perhaps they meant GWh? In which case it continues to be fairly small beer. In any event, it says nothing about the terms of sale, which could be linked to market prices.
The report linked to that one is perhaps closer to truths: the PPA market is dominated by big US companies in the US. At the end of 2019, just over $2bn of wind farm investment in Europe was backed by PPAs: that’s only a couple of largeish wind farms.
https://www.energymonitor.ai/tech/renewables/companies-are-embracing-renewable-energy-ppas
I expect that banks impose hedging contracts as a condition of lending, out of which they make their own pretty penny. Much like insisting on a borrower taking out an interest rate cap.
Yes indeed, the banks will require a CfD or PPA to be in place if the project is to be project financed. You might get away without a PPA if your project was majority equity financed (debt less than 50%), or backed by corporate guarantees, but in my experience globally (and I’ve done more than 100 power projects over 30 years in the industry) you will need a fixed price path PPA to cover the revenue risk to project finance a renewable power project.
A windfall tax on wind. CfD is an idea ripped from City spivs – time to admit that.
JF